The government on Monday proposed to raise social and infrastructure spending significantly but not at the cost of fiscal discipline, as Finance Minister P Chidambaram pledged to cut deficit from 4.3 to 3.8 per cent of Gross Domestic Product during 2006-07. Presenting his Budget in Parliament, Chidambaram said, "Revenue deficit is estimated at Rs 84,727 crore which is 2.1 per cent of GDP. Fiscal deficit is estimated at Rs 1,48,686 crore, which is 3.8 per cent of GDP."

Revenue deficit was pegged at 2.7 per cent in last year's Budget while fiscal deficit was targeted at 4.3 per cent. The government later revised the revenue deficit estimate to 2.6 per cent and fiscal deficit to 4.1 per cent.

The drastic cut in deficits, which is on the lines of Fiscal Responsibility and Budget Management Act, has been proposed despite substantial increase in expenditure for social and infrastructure sectors and with moderate tax rates.

Customs and excise rates have been slashed for a number of items, while there has been a raise in Service Tax and Securities Transaction Tax.

Total receipts and expenditures have been pegged at Rs 5,63,991 crore each for 2006-07. Revenue receipts are slated to rise by 15 per cent to Rs 4,03,465 crore this year from Rs 3,51,200 crore budgeted for last year.

Tax revenue is targeted at Rs 3,27,205 crore, a 20 per cent jump from last year's budget estimate of Rs 2,73,466 crore. The revised estimate for tax collection is at Rs 2,74,139 crore for 2005-06.